UPDATE: Russian economy continues to strengthen in October

Russia’s economy continued to strengthen in October, with industrial output 5.8% higher than in September (the biggest rise since April) and inflation falling to an annual rate of 6.1% (below market expectations). Inflation at the end of November will probably be below 6%. Both manufacturing and services PMI were in positive territory 52.40 and 52.70 respectively). Meanwhile Russia continues to be in line for a record grain harvest this year of around 106 million tonnes. This reflects an across the board strengthening of the Russia’s whole agriculture sector, which is growing at an annual rate of around 3%. The country in a few years has managed to become self-sufficient in pork and poultry where it was previously a big importer, and it should soon be self sufficient in beef as well, at which point it will have become entirely self-sufficient in all meat products. The transformation in Russia’s agriculture sector has enabled the country to cut food imports by 10% this year from those of the previous year.

Russia this year for the first time in its history is set to overtake the US to become the world’s biggest exporter of wheat, and it has also become a net exporter of certain other food products such as chicken meat. The days when Russian consumers bought chicken legs imported from the US (known locally as “Bush’s legs”) are gone. In the words of Russian Minister of Agriculture, Alexander Tkachev “To compare, ten years ago food import exceeded export volumes four times, and now export volume is only 1.5 time lower than import volume. Export growth is due to the increased supply of wheat (by 32%) and sunflower oil (by 15%)”. Tkachev has predicted that if government support for the agricultural sector remains at current levels, then by 2020 the value of the country’s food exports will equal that of its food imports.

With Russian agri-businesses now investing heavily in increasing food and vegetable output (the main food products Russia is still importing), the country looks set in the 2020s to become a major food exporter, with Russian Prime Minister Medvedev predicting that food exports will soon become Russia’s second biggest foreign currency earner after energy exports. Tkachev’s comment about the importance of government support being necessary to ensure the continued growth of Russia’s agricultural sector is undoubtedly what lies behind Putin’s gnomic comment of a few days ago that even if…